Despite a new report from Zillow.com that the annual rate of home price declines improved for the first time in ten quarters, the company’s COO does not think prices are anywhere near out of the woods yet.

He thinks some of the real estate bulls are not factoring in foreclosures nearly enough.

“One in four Americans now who have a mortgage are underwater on their loan at least somewhat so a lot of Americans can't qualify for Making Home Affordable [govt. modification plan], can't qualify for a loan modification or are caught up in the paperwork and bureaucracy of what it takes to modify your loan,” says Zillow’s Spencer Rascoff.

Sales volumes, according to Zillow data, are up year-over-year in 39 of the 161 metro areas the company tracks. Prices, year-over-year, are up in only 14 of the 161, but 18 of the declining MSA’s have posted at least three consecutive quarters of smaller year-over-year declines. I know, a lot of numbers, but the recovery in housing will be like the DC metro these days, slow and local.

“In the second half of 2009, home values are going to continue to decline.

Foreclosures are going to keep making up a significant part of the sales, probably about a quarter of all sales in the back half of 2009 nationwide will be foreclosures,” says Rascoff, adding, “I think you'll have those homes clear off the market but new foreclosures come on the market right behind them.”

Rascoff believes we are a full year away from a true national bottom in housing, but even then, he says, don’t expect to make money fast. “You're not going to see a return to rapid appreciation from a couple of years ago," he opines. "This is probably going to be an L-shaped recovery where home values stay relatively constant once they hit the bottom."

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